With all eyes on the S&P500 as it has been stalling over the past 16 trading days (almost all of May, see my update here), one may have lost sight of the tech sector: NASDAQ and NASDAQ100 (NDX). In this update I want to assess the state of these two indices using Elliot Wave Theory and associated Fibonacci-extensions and retraces.
First up, the NASDAQ100. Using Elliot Wave Theory patterns, see here for an explanation, I count the decline off the January high (wave-3) into the early-April low (wave-4) as a running flat (abc-correction). These are rare, but they usually form in strong [up] trends, which is exactly what we are experiencing now. I updated my Premium Members already late-March -yes that early and considered by few if any- of this possible pattern (see here) and continued to update my members of the index’ impulsive looking pattern (see for example here) as it continued to behave accordingly: for example it bottomed the next day right where I had anticipated it the prior day (see here). Why an impulse? Because in an impulse wave-3 often targets the 138.2 to 161.8% Fib-extension of wave-1, measured from the end of wave-2, and wave-4 than drops to the 100-76.4% extension, which is what happened 🙂 See the green Fib-extensions. Cont’d below.
Figure 1. NDX daily chart: continues to follow the Impulse- and Fib-extension pattern.
Thus, the preferred impulse pattern for the NDX keeps tracking the actual price action the best as minor-3 topped at the (green) 138.2% extension, minor-4 bottomed around the 100% extension and minor-5 is now most likely subdividing: (orange) micro-3 of (grey) minute-iii is now probably underway. Ideal target for all of minor-5 / intermediate-iii: $7165-7290. Note how the grey 200% (ideal minute-v target), green 200% (idea minor-5 target) and red 138.2% (ideal lower end of intermediate-iii) overlap reasonable well. All Technical Indicators are pointing up and are on Buy. Thus, we should therefore expect higher prices -in accordance with the EWT count- going forward.
Since, one chart is just that “one chart”, it pays to look at other charts to see if they corroborate the story. Here I look at the weekly chart of the NASDAQ, see below, where each “candle” represents one week, and the annotations in the chart tell the story: all developments are Bullish; not Bearish. We should therefore based on this chart also expect higher prices going forward.
Figure 2. NASDAQ weekly chart. A very strong chart, with no Bearish developments.
Hence, the weight of the evidence based on this analyses, which is a shortened version of my premium member weekly digest, tells us odds favor continued upside for the NASDAQ and NASDAQ100. As usual we’ll adjust our POV based on the latest price action.